UPDATE 1-China buys Boeing 777s, delays Airbus deal -sources

* Expected Boeing 777 deal worth $6 bln at list prices

* China Eastern suspends separate order for 15 Airbus A330

* Delayed Airbus jets highlight China-EU emissions row

April 26 China Eastern Airlines is set
to place a $6 billion order for up to 20 Boeing 777 jets,
while simultaneously emerging at the centre of an aviation row
between China and the European Union by stalling a recent Airbus
deal, people familiar with the matter said.

The order for wide-body 777s follows a fierce but discreet
contest between Boeing and Airbus and allows the U.S. planemaker
to bounce back after China's third-largest airline cancelled an
order for 24 of its latest flagship 787 Dreamliners last year.

Besides handing the 777 order to Boeing, China Eastern is
stalling on the completion of a $3 billion order for 15 Airbus
A330 aircraft announced last October, two of the people said.

Boeing, Airbus and China Eastern declined to comment.

The deals took shape at different times and for different
plane types, but together they highlight the stakes involved as
planemakers court the world's fastest-growing aviation market
under the shadow of a recent trade dispute between China and
Europe.

China and more than 20 nations oppose EU plans to force
airlines to adopt a carbon emissions-capping scheme that they
say will penalise foreign long-haul carriers and infringe
sovereignty. Airbus has said some plane sales could be
threatened.

The EU says its Emissions Trading Scheme (ETS) is needed to
meet climate targets and fill a void left by years of
international inaction over airline emissions.

Boeing and its European competitor Airbus are
betting on new Chinese wealth and government infrastructure
spending to bolster travel in the country, where domestic
passenger traffic is growing rapidly.

Chinese domestic air traffic is expected to grow by an
average of 7.5 percent per year until 2030, about three times
the rate in North America, and by around 7 percent on
inter-continental routes to and from China, according to Boeing.

In September, the U.S. jetmaker boosted its demand forecast
for China by 25 percent, predicting that it would need 5,000
commercial aircraft worth $600 billion over the next 20 years.

China earlier this month reported its weakest quarterly
economic growth in nearly three years, but Western plane
manufacturers believe the 8.1 percent first-quarter expansion
will continue to suck in regular imports of foreign jets.

The first 787 cancellation by a Chinese airline was widely
seen as a setback for Boeing, but the U.S. company has also been
riding high on record orders last year for the 777, which
dominates the market for aircraft with just under 400 seats.

Boeing said last month it was confident of selling China
more 777s and was in advanced talks with an unnamed airline.

China Eastern is the third-largest mainland carrier by
market value and second largest by domestic traffic, according
to airlines body IATA. Its board is expected to meet on Friday.

The company and its subsidiary Shanghai Airlines currently
operate a mixed fleet of Airbus and Boeing short-haul jets and
over 40 mainly Airbus long-haul aircraft.

The airline said in October it would place an order for 15
Airbus A330 aircraft subject to Chinese government approval, but
analysis of the Airbus order book suggests the necessary backing
has not yet materialized.

China Eastern said in October would return five long-range
A340s to Airbus at the same time as placing an order for 15
smaller A330s. Airbus has stopped producing the four-engined
A340, which was heavily outsold by Boeing's twin-engine 777.

The second-hand A340s, which are less fuel-efficient than
twin-engine jets and expensive to convert, may be broken up and
sold for parts if Airbus cannot find a buyer, market experts
said.
(Reporting by Tim Hepher, Kyle Peterson, Fang Yan)

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